Embattled Governor David Paterson came to Borough Hall Monday to talk budget, amid continued questions of his alleged misconduct.

Along the way, Paterson appeared to sidestep Atlantic Yards while addressing such issues as a tax on sugary drinks and allowing the sale of wine in grocery stores.

When asked about his support of the $4-plus billion Atlantic Yards including the Barclays Center arena, Paterson noted the project was already in place when he took office.

There has been plenty of debate on both sides of this issue, he said, noting the Supreme Court recently ruled in favor of condemning property for the 22-acre project at the Flatbush/Atlantic Avenue intersection.

“Ten years from now they [proponents of the project] will be right or you’ll be right, but I didn’t want to impose on the court’s decision,” said Paterson.

City Councilmember Letitia James, who first brought up Atlantic Yards, also questioned Paterson’s move to put a state tax on all sugary beverages, which will generate an estimated $450 million in revenue to state coffers this year.

Paterson responded that all the revenue from this source will go toward health care services and that the state spends about $7.5 billion in treating diabetes and heart disease, which in large part is caused by too much sugar in the diet.

Medical facilities throughout the state now have units for childhood stroke and heart attack victims, he said.

Paterson also pointed out that 60 percent of adults and 25 percent of children throughout the state are now classified as obese.

A Park Slope resident questioned Paterson’s call to allow the sale of wine in grocery stores and bodegas, saying that it will lead to an underage drinking problem as it does in states that allow alcohol and spirits to be sold in grocery stores.

But Paterson defended his proposal, saying the move will raise $250 million in licensing fees and 35 states already allow the sale of wine in liquor stores.

Paterson said while some of these states do have a rise in underage drinking it is mainly because they have lax liquor laws as well.

Paterson deflected reporters’ questions concerning recent allegations of his misconduct and insisted he will finish out this term, but will not seek re-election.

While in office, he faces a budget deficit as high as $9.2 billion, which Paterson is trying to trim with cuts to almost all services. This includes school aid ($1.1 billion), health care ($1 billion) and agency spending ($1 billion).

Paterson said while cuts to services across the board have to be made, they will be the first to be reinstituted once the economy comes back.

“The day of reckoning is actually here,” he said. “For too long the state has papered over deficits and squandered surpluses,” he said.